Table of Contents
Ultra Short Term Bond Funds
Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.
Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).
Ultra Short Term Bond Funds Features
Fund Type
Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.
NAV of Ultra Short Term Funds
For Ultra Short Term Funds, the purchase happens on a (T+0) Basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.
Exit Load of Ultra Short Term Bond Funds
Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.
Returns of Ultra Short Term Funds
The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).
Redemption Ultra Short Term Funds
In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.
Minimum Amount of Investment
The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).
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Investment Avenues of Ultra Short Mutual Funds
Ultra Short Term Funds are fixed Income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a Default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.
Why Invest in Best Ultra Short Term Funds?
Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.
Taxation of Ultra Short Term Funds
In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.
However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.
| Liquid Funds | Liquid Funds | Ultra Short Funds | Ultra Short Funds | |
|---|---|---|---|---|
| Class of Investors | Individuals/HUF | Corporate | Individuals/HUF | Corporate |
| Dividend Distribution Tax | 27.038% | 32.445% | 13. 519% | 32.445% |
| Short Term Capital Gains | As per income tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates |
(Please note, investors are advised to consult their Tax consultant before taking any decisions)
Best Performing Ultra Short Debt Funds to Invest FY 21 - 22
Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.
Fund NAV Net Assets (Cr) 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) Aditya Birla Sun Life Savings Fund Growth ₹419.332
↓ 0.00 ₹17,295 0.2 1 2.4 6.8 7.6 7.9 ICICI Prudential Ultra Short Term Fund Growth ₹21.3752
↑ 0.00 ₹9,030 0.3 1 2.5 6.3 7.4 7.8 SBI Magnum Ultra Short Duration Fund Growth ₹4,643.07
↑ 0.28 ₹14,533 0.2 0.8 1.9 5.7 7.2 7.1 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 15 Jan 21
The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents. Aditya Birla Sun Life Savings Fund is a Debt - Ultrashort Bond fund was launched on 16 Apr 03. It is a fund with Moderately Low risk and has given a Below is the key information for Aditya Birla Sun Life Savings Fund Returns up to 1 year are on (Erstwhile ICICI Prudential Regular Income Fund) The fund’s objective is to generate regular income through investments primarily in debt and money market instruments. As a secondary objective, the Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme. ICICI Prudential Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 3 May 11. It is a fund with Moderate risk and has given a Below is the key information for ICICI Prudential Ultra Short Term Fund Returns up to 1 year are on (Erstwhile SBI Magnum InstaCash Fund) To provide the investors an opportunity to earn returns through investment in
debt & money market securities, while having the benefit of a very high degree of liquidity. SBI Magnum Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 21 May 99. It is a fund with Low risk and has given a Below is the key information for SBI Magnum Ultra Short Duration Fund Returns up to 1 year are on 1. Aditya Birla Sun Life Savings Fund
CAGR/Annualized return of 7.7% since its launch. Ranked 6 in Ultrashort Bond category. Return for 2020 was 7% , 2019 was 8.5% and 2018 was 7.6% . Aditya Birla Sun Life Savings Fund
Growth Launch Date 16 Apr 03 NAV (15 Jan 21) ₹419.332 ↓ 0.00 (0.00 %) Net Assets (Cr) ₹17,295 on 30 Nov 20 Category Debt - Ultrashort Bond AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.39 Sharpe Ratio 2.55 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 3.76% Effective Maturity 6 Months 7 Days Modified Duration 5 Months 16 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹10,924 31 Dec 17 ₹11,709 31 Dec 18 ₹12,603 31 Dec 19 ₹13,669 31 Dec 20 ₹14,629 Returns for Aditya Birla Sun Life Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.2% 3 Month 1% 6 Month 2.4% 1 Year 6.8% 3 Year 7.6% 5 Year 7.9% 10 Year 15 Year Since launch 7.7% Historical performance (Yearly) on absolute basis
Year Returns 2020 7% 2019 8.5% 2018 7.6% 2017 7.2% 2016 9.2% 2015 8.9% 2014 9.7% 2013 9.5% 2012 9.7% 2011 9.2% Fund Manager information for Aditya Birla Sun Life Savings Fund
Name Since Tenure Sunaina Cunha 11 Oct 14 6.23 Yr. Kaustubh Gupta 15 Jul 11 9.47 Yr. Data below for Aditya Birla Sun Life Savings Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 56.59% Debt 43.41% Debt Sector Allocation
Sector Value Corporate 47.34% Cash Equivalent 33.17% Government 19.09% Securitized 0.39% Credit Quality
Rating Value AA 9.31% AAA 90.69% Top Securities Holdings / Portfolio
Name Holding Value Quantity 182 DTB 04032021
Sovereign Bonds | -4% ₹696 Cr 70,000,000 364 DTB 07052021
Sovereign Bonds | -3% ₹495 Cr 50,000,000 Mahindra & Mahindra Financial Services Limited
Debentures | -3% ₹450 Cr 4,450 182 DTB 11032021
Sovereign Bonds | -2% ₹398 Cr 40,000,000 Shriram Transport Finance Company Limited
Debentures | -2% ₹375 Cr 3,750 8.83% Govt Stock 2023
Sovereign Bonds | -2% ₹342 Cr 30,500,000
↑ 10,000,000 REC Limited
Debentures | -2% ₹331 Cr 3,200 Rural Electrification Corporation Limited
Debentures | -2% ₹271 Cr 2,650 Muthoot Finance Limited
Debentures | -1% ₹242 Cr 2,350 Rural Electrification Corporation Limited
Debentures | -1% ₹231 Cr 2,250 2. ICICI Prudential Ultra Short Term Fund
CAGR/Annualized return of 8.1% since its launch. Ranked 27 in Ultrashort Bond category. Return for 2020 was 6.5% , 2019 was 8.4% and 2018 was 7.5% . ICICI Prudential Ultra Short Term Fund
Growth Launch Date 3 May 11 NAV (15 Jan 21) ₹21.3752 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹9,030 on 30 Nov 20 Category Debt - Ultrashort Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆ Risk Moderate Expense Ratio 0.96 Sharpe Ratio 2.24 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load 0-1 Months (0.5%),1 Months and above(NIL) Yield to Maturity 4.61% Effective Maturity 5 Months 12 Days Modified Duration 4 Months 20 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹10,982 31 Dec 17 ₹11,743 31 Dec 18 ₹12,623 31 Dec 19 ₹13,688 31 Dec 20 ₹14,582 Returns for ICICI Prudential Ultra Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.3% 3 Month 1% 6 Month 2.5% 1 Year 6.3% 3 Year 7.4% 5 Year 7.8% 10 Year 15 Year Since launch 8.1% Historical performance (Yearly) on absolute basis
Year Returns 2020 6.5% 2019 8.4% 2018 7.5% 2017 6.9% 2016 9.8% 2015 9.1% 2014 14.8% 2013 3.1% 2012 9.4% 2011 Fund Manager information for ICICI Prudential Ultra Short Term Fund
Name Since Tenure Manish Banthia 15 Nov 16 4.13 Yr. Ritesh Lunawat 15 Jun 17 3.55 Yr. Data below for ICICI Prudential Ultra Short Term Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 49.43% Debt 50.57% Debt Sector Allocation
Sector Value Corporate 72.06% Cash Equivalent 24.34% Government 3.6% Credit Quality
Rating Value A 1.53% AA 34.48% AAA 64% Top Securities Holdings / Portfolio
Name Holding Value Quantity 91 DTB 7012021
Sovereign Bonds | -4% ₹300 Cr 30,000,000 REC Limited
Debentures | -3% ₹291 Cr 2,850 Reliance Ports and Terminals Limited
Debentures | -2% ₹210 Cr 2,019 Manappuram Finance Limited
Debentures | -2% ₹206 Cr 2,000 Housing Development Finance Corporation Limited
Debentures | -2% ₹153 Cr 1,500 Tata Value Homes Limited
Debentures | -2% ₹151 Cr 1,500 Aspire Home Finance Corporation Limited
Debentures | -2% ₹149 Cr 1,500 Tata Realty and Infrastructure Limited
Debentures | -2% ₹147 Cr 1,250 Power Finance Corporation Limited
Debentures | -2% ₹138 Cr 1,350 Small Industries Development Bank of India
Debentures | -1% ₹127 Cr 1,250
↑ 500 3. SBI Magnum Ultra Short Duration Fund
CAGR/Annualized return of 7.3% since its launch. Return for 2020 was 5.9% , 2019 was 8% and 2018 was 7.9% . SBI Magnum Ultra Short Duration Fund
Growth Launch Date 21 May 99 NAV (15 Jan 21) ₹4,643.07 ↑ 0.28 (0.01 %) Net Assets (Cr) ₹14,533 on 30 Nov 20 Category Debt - Ultrashort Bond AMC SBI Funds Management Private Limited Rating ☆☆☆ Risk Low Expense Ratio 0.52 Sharpe Ratio 2.59 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 0% Effective Maturity Modified Duration Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹10,766 31 Dec 17 ₹11,477 31 Dec 18 ₹12,386 31 Dec 19 ₹13,372 31 Dec 20 ₹14,158 Returns for SBI Magnum Ultra Short Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.2% 3 Month 0.8% 6 Month 1.9% 1 Year 5.7% 3 Year 7.2% 5 Year 7.1% 10 Year 15 Year Since launch 7.3% Historical performance (Yearly) on absolute basis
Year Returns 2020 5.9% 2019 8% 2018 7.9% 2017 6.6% 2016 7.7% 2015 8.3% 2014 9% 2013 9.3% 2012 9.3% 2011 8.7% Fund Manager information for SBI Magnum Ultra Short Duration Fund
Name Since Tenure Rajeev Radhakrishnan 1 May 10 10.68 Yr. Data below for SBI Magnum Ultra Short Duration Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 58.68% Debt 41.32% Debt Sector Allocation
Sector Value Corporate 34.99% Government 32.83% Cash Equivalent 32.18% Credit Quality
Rating Value AA 1.45% AAA 98.55% Top Securities Holdings / Portfolio
Name Holding Value Quantity 364 DTB 22042021
Sovereign Bonds | -8% ₹1,080 Cr 109,000,000 91 DTB 28012021
Sovereign Bonds | -7% ₹998 Cr 100,000,000
↓ -100,000,000 Rural Electrification Corporation Limited
Debentures | -5% ₹691 Cr 6,750 8.20% Govt Stock 2022
Sovereign Bonds | -3% ₹420 Cr 40,000,000 7.80% Govt Stock 2021
Sovereign Bonds | -3% ₹405 Cr 40,000,000
↑ 40,000,000 Mahindra & Mahindra Financial Services Limited
Debentures | -3% ₹379 Cr 3,000 182 DTB 04022021
Sovereign Bonds | -2% ₹349 Cr 35,000,000 91 DTB 14012021
Sovereign Bonds | -2% ₹300 Cr 30,000,000 05.54 MP SDL 2021
Sovereign Bonds | -2% ₹299 Cr 29,500,000 Housing Development Finance Corporation Limited
Debentures | -2% ₹236 Cr 2,300
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